v3.26.1
Derivatives and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities
7. Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. The primary derivatives that we use are interest rate swaps, caps, floors, forwards, and futures; foreign exchange contracts; commodity derivatives; and credit derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in our loan portfolio, hedge against changes in foreign currency exchange rates, and facilitate client financing and hedging needs.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 113 of our 2025 Form 10-K. Our derivative strategies and related risk management objectives are described in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K.

Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2026, and December 31, 2025. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the Consolidated Balance Sheets, as follows:
 March 31, 2026December 31, 2025
  
Fair Value(a)
 
Fair Value(a)
Dollars in millionsNotional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Derivatives designated as hedging instruments:
Interest rate$60,560 $20 $2 $64,228 $(13)$4 
Derivatives not designated as hedging instruments:
Interest rate74,208 95 580 74,994 145 573 
Foreign exchange6,180 90 84 5,767 83 80 
Commodity6,903 406 394 5,553 249 237 
Credit118 — 1 107 — 8 
Other (b)
5,814 52 16 4,217 8 25 
Total derivatives not designated as hedging instruments:93,223 643 1,075 90,638 485 923 
Total derivatives153,783 663 1,077 154,866 472 927 
Netting adjustments (c)
— (295)(485)— (297)(274)
Net derivatives in the balance sheet153,783 368 592 154,866 175 653 
Other collateral (d)
— — (4)— (22)(1)
Net derivative amounts$153,783 $368 $588 $154,866 $153 $652 
(a)We take into account bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related cash collateral when recognizing derivative assets and liabilities. As a result, we could have derivative contracts with negative fair values included in derivative assets and contracts with positive fair values included in derivative liabilities.
(b)Other derivatives include interest rate lock commitments related to our residential and commercial banking activities, forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when-issued securities, and other customized derivative contracts.
(c)Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. As of March 31, 2026, excess collateral that has not been offset against net derivative instrument positions totaled $246 million of cash collateral and $261 million of securities collateral posted as well as $9 million of cash collateral held. As of December 31, 2025, excess collateral that has not been offset against net derivative instrument positions totaled $165 million of cash collateral and $218 million of securities collateral posted as well as $3 million of cash collateral and $78 million of securities collateral held.
(d)Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Fair value hedges. During the three months ended March 31, 2026, we did not exclude any portion of fair value hedging instruments from the assessment of hedge effectiveness.

The following tables summarize the amounts that were recorded on the balance sheet as of March 31, 2026, and December 31, 2025, related to cumulative basis adjustments for fair value hedges.
March 31, 2026
Dollars in millionsBalance sheet line item in which the hedge item is included
Carrying amount of hedged item (a)
Hedge accounting basis adjustment - active hedgesHedge accounting basis adjustment - discontinued hedges
Interest rate contractsLong-term debt$9,185 $(228)$(3)
Interest rate contracts
Securities Available for Sale(b)
13,147 (39)14 
December 31, 2025
Balance sheet line item in which the hedge item is included
Carrying amount of hedged item (a)
Hedge accounting basis adjustment - active hedgesHedge accounting basis adjustment - discontinued hedges
Interest rate contractsLong-term debt$8,504 $(199)$(3)
Interest rate contracts
Securities Available for Sale(b)
12,843 (100)14 
(a)The carrying amount represents the portion of the asset or liability designated as the hedged item.
(b)Certain amounts are designed as fair value hedges under the portfolio layer method. The carrying amount represents the amortized costs basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the relationship. At March 31, 2026, and December 31, 2025, the amortized costs of the closed portfolios in these hedging relationships was $7 billion and $7 billion, respectively, of which $5.3 billion and $4.9 billion, respectively, were designated in a portfolio layer hedging relationship. At March 31, 2026, the cumulative basis adjustments associated with these amounts totaled $(1) million, which is comprised of $(15) million in active hedging relationships and $14 million for discontinued hedging relationships. At December 31, 2025, the cumulative basis adjustments associated with these amounts totaled $(35) million, which is comprised of $(50) million in active hedging relationships and $14 million for discontinued hedging relationships.

Cash flow hedges. During the three-month period ended March 31, 2026, we did not exclude any portion of cash flow hedging instruments from the assessment of hedge effectiveness.

Considering the interest rates, yield curves, and notional amounts as of March 31, 2026, we expect to reclassify an estimated $77 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we expect to reclassify approximately $3 million of net losses related to terminated cash flow hedges from AOCI to income during the next 12 months. These reclassified amounts could differ from actual amounts recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to March 31, 2026. As of March 31, 2026, the maximum length of time over which we hedge forecasted transactions is 3.51 years.

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three-month periods ended March 31, 2026, and March 31, 2025.
Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships

Dollars in millions
Interest expense – long-term debtInterest income – loansInterest Income - securitiesInvestment banking and debt placement fees
Three Months Ended March 31, 2026
Total amounts presented in the consolidated statement of income$(151)$1,416 $370 $197 
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items29 — (61)— 
Recognized on derivatives designated as hedging instruments(51)— 51 — 
Net income (expense) recognized on fair value hedges$(22)$— $(10)$— 
Net gain (loss) on cash flow hedging relationships
Realized gains (losses) (pre-tax) reclassified from AOCI into net income
Interest contracts$(1)$(36)$— $— 
Net income (expense) recognized on cash flow hedges$(1)$(36)$— $— 

Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships

Dollars in millions
Interest expense – long-term debtInterest income – loansInterest Income - securitiesInvestment banking and debt placement fees
Three Months Ended March 31, 2025
Total amounts presented in the consolidated statement of income$(193)$1,401 $392 $175 
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items(153)— 78 — 
Recognized on derivatives designated as hedging instruments108 — (71)— 
Net income (expense) recognized on fair value hedges$(45)$— $7 $— 
Net gain (loss) on cash flow hedging relationships
Realized gains (losses) (pre-tax) reclassified from AOCI into net income
Interest contracts$(1)$(93)$— $— 
Net income (expense) recognized on cash flow hedges$(1)$(93)$— $— 

The following table summarizes the pre-tax effect of our cash flow hedges for the three-month periods ended March 31, 2026, and March 31, 2025.

Three months ended,
Dollars in millions
March 31, 2026March 31, 2025
Net Gains (Losses) Recognized in OCI
Interest income — Loans$449 $241 
Interest expense — Long-term debt2 (1)
Total$451 $240 
Net Gains (Losses) Reclassified From AOCI Into Income
Interest income — Loans$(36)$(93)
Interest expense — Long-term debt(1)(1)
Total$(37)$(94)

Nonhedging instruments. The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2026, and March 31, 2025, and where they are recorded on the income statement.

 Three months ended March 31, 2026Three months ended March 31, 2025
Dollars in millions
Corporate
services
income
Consumer mortgage incomeOther incomeTotalCorporate services incomeConsumer mortgage incomeOther incomeTotal
NET GAINS (LOSSES)
Interest rate$8 $— $— $8 $8 $— $6 $14 
Foreign exchange13 — — 13 12 — — 12 
Commodity2 — — 2 2 — — 2 
Credit— — (8)(8)— — (12)(12)
Other— 2 50 52 — — 5 5 
Total net gains (losses)$23 $2 $42 $67 $22 $— $(1)$21 
Counterparty Credit Risk

We hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $45 million was netted against derivative assets on the balance sheet at March 31, 2026, compared to $103 million of cash collateral netted against derivative assets at December 31, 2025. The cash collateral netted against derivative liabilities totaled $235 million at March 31, 2026, and $80 million at December 31, 2025. Our means of mitigating and managing exposure to credit risk on derivative contracts is described in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K under the heading “Counterparty Credit Risk.”

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our net exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.
Dollars in millionsMarch 31, 2026December 31, 2025
Interest rate$47 $82 
Foreign exchange58 39 
Commodity256 149 
Other52 8 
Derivative assets before collateral413 278 
Plus(Less): Related collateral(45)(103)
Total derivative assets$368 $175 

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. Our credit derivative portfolio was in a net liability position as of March 31, 2026 and December 31, 2025. Our credit derivative portfolio consists of traded credit default swap indices and risk participation agreements. Additional descriptions of our credit derivatives are provided in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K under the heading “Credit Derivatives.”

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2026, and December 31, 2025. The notional amount represents the amount that the seller could
be required to pay. The payment/performance risk shown in the table represents a weighted average of the default
probabilities for all reference entities in the respective portfolios. These default probabilities are implied from
observed credit indices in the credit default swap market, which are mapped to reference entities based on Key’s internal risk rating.
 March 31, 2026December 31, 2025
Dollars in millionsNotional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Notional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Other$4 4.662.49 %$9 3.621.76 %
Total credit derivatives sold$4 — — $9 — — 

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At March 31, 2026, KeyBank’s rating was “Baa1” with Moody’s and “BBB+” with S&P, and KeyCorp’s rating was “Baa2” with Moody’s and “BBB” with S&P. Refer to the table below for the aggregate fair value of all derivative contracts with credit risk contingent features held by KeyBank that were in a net liability position.
Dollars in millionsMarch 31, 2026December 31, 2025
Net derivative liabilities with credit-risk contingent features

$(130)$(49)
Collateral posted126 49 
As of March 31, 2026, and December 31, 2025, the fair value of additional collateral that could be required to be posted as a result of the credit risk related contingent features being triggered was immaterial to Key’s consolidated financial statements. At March 31, 2026, and December 31, 2025, only KeyBank held derivative contracts with credit risk contingent features.